2014 (12) TMI 779 - HC - Central Excise

Timely Penalty Imposition Key: Tribunal Upholds Deletion Beyond 5 Years

The Tribunal dismissed the appeal challenging penalties under the Compounded Levy Scheme, emphasizing the need for penalties to be imposed within a ... Initiation of penal provisions after expiry of 5 years - Tribunal held that penal proceedings under Rule 96ZP(3) cannot be initiated after expiry of five years - Held that:- any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, therefore, must be specifically enacted and prescribed therefor. It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period. The period of five years has been held to be reasonable period for initiating penalty proceedings. Tribunal had rightly upheld the order of Commissioner (Appeals) deleting the penalty on the ground that the proceedings for the same were initiated after 5 years from the relevant date. Accordingly, no substantial question of law arises - Following judgment in Raghuvar (India) Limited’s case [2000 (5) TMI 40 - SUPREME COURT OF INDIA] - Decided against Revenue. Issues:1. Interpretation of provisions under the Compounded Levy Scheme2. Discretion in imposing penalties under erstwhile Rule 96(ZP) of Central Excise Rules, 19443. Applicability of Section 11A of the Central Excise Act, 1944 to the Compounded Levy Scheme4. Applicability of Section 38A of the Central Excise Act, 1944 to obligations under erstwhile Central Excise Rules 1944Analysis:Issue 1: Interpretation of provisions under the Compounded Levy SchemeThe appeal raised questions regarding the legality of penalties under the Compounded Levy Scheme. The appellant questioned the imposition of penalties without considering the circumstances of delay in payment of duty. The Tribunal dismissed the appeal, citing a previous judgment and the pending Special Leave Petition in the Apex Court. The Tribunal's decision was based on the judgment in CCE Chandigarh v. Hari Concast Limited, emphasizing the need for penalties to be imposed within a reasonable time.Issue 2: Discretion in imposing penalties under erstwhile Rule 96(ZP) of Central Excise Rules, 1944The case involved a penalty imposed on the assessee for failing to pay the duty within the prescribed time limit. The adjudicating authority imposed a penalty equal to the outstanding duty amount. The Commissioner (Appeals) set aside the penalty, leading to the revenue's appeal before the Tribunal. The Tribunal upheld the Commissioner's decision, stating that penalties should be initiated within a reasonable period, as per the judgment in State of Punjab v. Bhatinda District Cooperative Milk Producers Union Limited. The Tribunal emphasized the need for penalties to be imposed within five years from the relevant date.Issue 3: Applicability of Section 11A of the Central Excise Act, 1944 to the Compounded Levy SchemeThe Tribunal's decision was also based on the applicability of Section 11A of the Central Excise Act, 1944 to the Compounded Levy Scheme. The Tribunal held that the proceedings for imposing penalties must adhere to a reasonable period of limitation, which in this case was set at five years. The Tribunal referenced the judgment in Raghuvar (India) Limited's case to support the notion that penalties should be initiated within a reasonable period.Issue 4: Applicability of Section 38A of the Central Excise Act, 1944 to obligations under erstwhile Central Excise Rules 1944The Tribunal addressed the applicability of Section 38A of the Central Excise Act, 1944 to obligations under the erstwhile Central Excise Rules 1944. The Tribunal concluded that penalties should be imposed within a reasonable period, and any delay beyond five years may result in the penalty being set aside. The Tribunal upheld the decision of the Commissioner (Appeals) to delete the penalty, as the proceedings were initiated after five years from the relevant date. Consequently, the Tribunal dismissed the appeal, stating that no substantial question of law arose due to the delay in initiating penalty proceedings.In conclusion, the Tribunal's decision emphasized the importance of imposing penalties within a reasonable time frame and upheld the deletion of the penalty based on the limitations set forth in the Central Excise Act, 1944 and relevant judgments.